Exam 8: Variable Costing and the Costs of Quality and Sustainability

Chu Enterprise's inventory increased during the year.On the basis of this information, income reported under absorption costing:

Vega Enterprises has computed the following unit costs for the year just ended: Under absorption costing, each unit of the company's inventory would be carried at:

Favaz began business at the start of this year and had the following costs: variable manufacturing cost per unit, $9; fixed manufacturing costs, $60,000; variable selling and administrative costs per unit, $2; and fixed selling and administrative costs, $220,000.The company sells its units for $45 each.Additional data follow: There were no variances. The income (loss) under variable costing is:

Under variable costing, which of the following is not considered a product cost?

Callaway Corp., which began business at the start of the current year, had the following data: Planned and actual production: 40,000 units Sales: 38,000 units at $15 per unit Production costs: Variable: $5 per unit Fixed: $260,000 Selling and administrative costs: Variable: $1 per unit Fixed: $32,000 The gross margin that the company would disclose on an absorption-costing income statement is:

Which of the following conditions would cause absorption-costing income to be higher than variable-costing income?

Required: Prepare a quality-cost report.

When units sold exceed units produced, absorption-costing income will be lower than variable-costing income.

All of the following are inventoried under absorption costing except:

White Water Rafting Company manufactures kayaks, which sell for $565 each.The variable costs of production (per unit) are as follows: Budgeted fixed overhead in 20x1 was $400,000 and budgeted production was 50,000 kayaks.The year's actual production was 50,000 units, of which 47,000 were sold.Variable selling and administrative costs were $5 per unit sold; fixed selling and administrative costs were $75,000. Required: 1.Calculate the product cost per kayak under (a) absorption costing and (b) variable costing. 2.Prepare operating income statements for the year using (a) absorption costing and (b) variable costing. 3.Reconcile reported operating income under the two methods using the shortcut method.

Montana Industries has the following costs for the year just ended: What is the difference between operating incomes under absorption costing and variable costing?

Absorption costing is inconsistent with CVP analysis.

Absorption costing is required for tax purposes.

Fort Smith Technologies incurred the following costs during the past year when planned production and actual production each totaled 20,000 units: Fort Smith's per-unit inventoriable cost under absorption costing is:

All of the following costs are inventoried under absorption costing except:

Total quality management or TQM refers to the broad set of management and control processes designed to focus the entire organization and all of its employees on providing products or services that do the best possible job of satisfying the customer.

For external-reporting purposes, generally accepted accounting principles require that net income be based on variable costing.

Consider the following comments about absorption- and variable-costing income statements: I.A variable-costing income statement discloses a firm's contribution margin. II.Cost of goods sold on an absorption-costing income statement includes fixed costs. III.The amount of variable selling and administrative cost is the same on absorption- and variable-costing income statements. Which of the above statements is (are) true?

Which of the following formulas can often reconcile the difference between absorption- and variable-costing income?

Riverton Corp., which began business at the start of the current year, had the following data: Planned and actual production: 40,000 units Sales: 37,000 units at $15 per unit Production costs: Variable: $4 per unit Fixed: $260,000 Selling and administrative costs: Variable: $1 per unit Fixed: $32,000 The gross margin that the company would disclose on an absorption-costing income statement is: